A rising government deficit will always allow the private domestic sector to increase its saving in nominal terms.
Answer: False
The answer is False.
This answer should be read as a complement to the discussion in Question 2 as it also can be considered in terms of the sectoral balances.
If the external balance is zero (that is, net exports equal zero) the there is a one-to-one correspondence between the government balance and the private domestic sector balance such that, for example, a 2 per cent budget deficit must be associated with a 2 per cent private domestic sector balance surplus.
So in this circumstance the answer would be true.
But things get complicated when we introduce positive or negative external balances. Then a 2 per cent budget deficit might be associated with a 3 per cent external deficit and so the private domestic sector balance will be in deficit.
So the answer is only true if the budget deficit is larger (as a percent of GDP) than the external balance and growing faster.